TTPC is an independent power producer that owns and operates a 650-MW combined-cycle, gas-turbine power plant (“the Plant”) in Kuala Sungai Baru, Perlis.

Under a Power Purchase Agreement (PPA) with Tenaga Nasional Berhad (TNB), TTPC sells generating capacity and electrical energy to TNB for 21 years, effective 31 March 2003 until 31 March 2024 (the PPA has a remaining tenure of 11.5 years).

The Proposed Sukuk Murabahah will be largely utilised to refinance the Company’s existing RM1,515 million Al-Istisna’ Fixed-Rate Serial Bonds (2001/2016) (“Al-Istisna’ Bonds”) - of which RM645 million remained outstanding as at end-September 2012.

Notably, the Proposed Sukuk Murabahah has been re-profiled with a more stringent finance service coverage ratio (FSCR) distribution covenant of 1.80 times against the 1.40 times under its Al-Istisna’ Bonds; this is possible as the financial obligations of the Proposed Sukuk Murabahah have been stretched throughout the remaining tenure of the PPA and these are expected to be amply covered by the project’s remaining cashflow.

TTPC has a healthy liquidity position, underpinned by its relatively stable cash-generating ability. The rating reflects TTPC’s robust debt-servicing aptitude. Based on RAM’s sensitised cashflow projections, the Company’s minimum FSCR (with cash balances, post-distribution and measured over a 12-month period on semi-annual principal repayment dates) is expected to come up to 1.82 times, which commensurates with an AA1 rating.

Our cashflow analysis assumes that TTPC will pay optimum dividends to its shareholders - pursuant to a shareholders’ agreement on 23 May 2008 - while adhering to its financial covenants throughout the tenure of the Proposed Sukuk Murabahah (i.e. on a forward-looking basis, as opposed to only the year of assessment).

The rating is also supported by TTPC’s strong business profile, underscored by its favourable PPA terms. We derive further comfort from the sturdy credit profile of TNB, whose debt facility carries an AAA long-term rating, with a stable outlook.

Since its commissioning, TTPC has maintained its laudable operational performance, enabling it to meet all the performance requirements specified in the PPA to earn full available capacity payments.

The Company has also been able to operate within the unscheduled outage limit of 6 per cent since its commissioning, and has met the requirements of its combined first and second Availability Target (AT) blocks (i.e. 2004-2009).

RAM opines that TTPC is on course towards meeting the requirements of its third AT block (2010-2012). Given the Plant’s efficient performance, TTPC has been able to consistently and fully pass through its fuel costs to TNB.

Similar to all other IPPs, however, TTPC remains exposed to regulatory and single-project risks. – Reuters

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